TR EMERITUS

By Jeffrey Ho, Guest Columnist 16 July 2009 To: SM Goh Chok Tong - MAS Chariman Dear SM Goh, Further to my 19th Nov 2008 email to you (attached), based on my understanding of the attached 14th July 2009 New Paper article, "The real problem? Underwriters hiding product's risk", it confirms my suspicion that the banks (or "underwriters" described in the article?) are benefiting from investors' misery/loss. Can MAS confirm? Banks have structured the products in such a way that all the risks of default are transferred to the investors who in actual fact act as "CDS insurers" (but unknown to them, unfortunately). Whether these risky bonds default or not, banks/underwriters have 2 potential revenue streams (sure-win situation): (1)  If there are no bond defaults, they earn from the difference in high-yielding risky bonds' high interest margins less the 5% paid to investors and "expenses"; (2) They earn even more when there are enough bond defaults to trigger "transfer of (up to) 100% of investors money to the underwriter". While DBS (the entity) has said "it sold its rights to the $103m of investor losses", it failed to satisfy many questions on everyone's mind, as detailed in the New Paper article, like: 1. What happens to the rest of the investors' money lost? 2. How much did DBS (the entity) earn from selling the "rights"? 3. When was it sold? 4. Who did it sell to - an affiliated/related company? If so, DBS Group would still have pocketed the millions of investors' losses right, but how much? 5. What about losses incurred by Minibond, Pinnacle, Jubilee investors? Billions of structured notes were sold, and the article mentioned defaults stood at $686 million. Where did all the money go? Should MAS have done more to mitigate investors' losses by requiring those "underwriters" and/or banks that have been "hiding product's risk" from such investors to come clean and refund the amount of investors' losses they have pocketed when Lehman and other risky bonds' defaults triggered transfers of such money to them? Best Regards Jeffrey  Read More →

By Jeremy Koh and Eugene Yeo A relative of mine bought a 3 room unit of a 99 year old condominium in Tampines last month at a whooping $900,000K. If I remembered correctly, the median price of the project was only $700,000 in 2007. A colleague bought a penthouse at The Calrose for over $1.5 million dollars. The launch price 3 years ago was slightly less than $1 million dollars. Are we entering another bull run in the property market? The Straits Times seems to think so, at least from its suggestive headline "Record private home sales': - "It was another electrifying month for the private home market, with sales last month surpassing even levels seen at the height of the boom two years ago. The recession-defying numbers for yet another month point to surging confidence among buyers and sellers, and signal that the worst is likely over." [Source: Straits Times, 16 July 2009] Are the good old days coming back soon? Will prices go up indefinitely? One does not need to be a property expect to realize that current prices are unsustainable in the long run for the following reasons: 1. Though the government has moderated its GDP forecast in view of better than expected performance of the economy in the second quarter of 2009, the global economy, especially that of the United States, remain in the doldrums and is not expected to recover till the end of 2010. 2. Over 70% of the private residential projects are bought by foreigners which contributed to the latest property boom from 2006 to 2008. With MNCs scaling down their operations and moving to cheaper destinations, the number of foreign buyers in Singapore's property market is expected to decrease. 3. Rentals continue to fall in 2009 as the market cools down, with the most appreciable decline noted in the prime areas. The average monthly rent for luxurious non-landed homes in Singapore fell 18.8% on a quarterly basis to $5.20 psf pm in Q1 2009. For example, St Regis rents start at $7,500 for the smallest 1,507 sq ft three-bedroom unit and $20,000 for the 3,757 sq ft, four-bedroom unit, or around $5 to $5.30 psf per month. The average rent record for Grange Residences, a prime but slightly older condo, is at $6.20 psf per month at the end of last year. Meanwhile, the average rents of non-landed homes in the prime districts fell 16.2% on a quarterly basis to $3.65 psf pm in Q1 2009. However, newer projects are still able to command rents of $4.60 psf to $5.00 psf per month. For example, the transacted rents for one-bedroom units of 690sq ft at the Sail @ Marina Bay now stand at $3,200 a month. [Source: iproperty.com] 4. There will be a deluge of new projects which will obtain T.O.P. in 2009 and 2010 thereby exerting further downward pressure on the prices. Based on these multitude of factors, it is highly unlikely that prices will continue to rise any longer. In fact, the market should be heading for a crash if it is not popped up artificially by the HDB resale market. Singapore is the only democratic country in the world that has a huge public housing programme. Even china does not have a public housing programme that takes up 86% of all residential land. Due to the sheer size of Singapore's public flat segment, and the tendency for the government to intervene directly in the property market, home prices in general (excluding the high-end segment) tend to swing back and forth within a manageable range. The recent HDB resale transactions in March 2009 have shown that buyers are paying prices high enough to prop up the S$600 per sq ft threshold for most mass market condo projects. Flat buyers are paying between S$250 per sq ft to S$330 per sq ft just to own quarter-century old HDB resale 3-room flats in suburban areas such as Yishun, Woodlands and Hougang. In Kim Tian Road, which is a short drive from the Central Business District (CBD), buyers would have to pay much higher per sq ft prices such as between S$450 per sq ft to S$550 per sq ft for six-year old resale 5-room flats. [Source: iproperty.com] The resale prices of Housing Board flats have risen by 10 to 15 per cent in the past one to two years, despite the recession that began in September last year.]  The HDB may have contributed to the spike when it decided to raise the valuation prices of its flats last year, saying it would help buyers as a lower cash-above-valuation payment would result. While the cash request is slightly lower, the valuation price has leapt. The price of a four-room flat in Tampines is about $370,000 now, some $40,000 more than the price early last year - and this is largely due to the higher valuation price. Instead of helping to stabilise prices, the HDB’s spike in valuation has been instrumental in increasing resale prices. [Source: Straits Times, 14 July 2009 How much longer can HDB continue to pop up the resale market? Will it come to a day when a four room 99-year resale HDB flat in the suburbs fetch more than $500,000K on average? Left alone to market forces, the prices of HDB resale flats are likely to plummet, at least back to the 2007 levels. The astronomical prices of HDB resale flats help to support the prices of mass market condos which in turn ameliorate the expected plunge in the prices of luxurious condos. Capitalizing on the profits made from the sale of their flats, HDB upgraders are able to afford paying over-valuation prices for private apartments and landed homes which in turn fuel the inflation of prices. It is a vicious cycle which will eventually implode upon itself in the event of a crash in either the high-end or HDB resale market. With the continued efflux of foreigners from Singapore, the high end market may crash sooner than later which will bring down prices drastically in the mass market condos and HDB flats in a domino-like effect. The median prices of HDB flats will never exceed that of mass market condos. They are after all, public housing built by the government and they are supposed to be easily affordable. Already, some HDB flats in prime areas like Bishan, Tanjong Pagar and Bukit Merah are fetching prices close to or exceeding that of condomniums in remote areas like Woodlands and Jurong. Unless the prices for the mass market condominiums continue to increase, the present HDB valuation hike is untenable. The ongoing "boom" in the property market may soon become a "bomb" for some when supply far outstrips demand precipitating a general drop in the prices. Given the economic uncertainty plaguing the world and Singapore in the days ahead, it is advisable not to purchase a property now unless it is absolutely necessary. It may be more prudent to sit on the fence and wait rather than to jump onto the bandwagon and get 'burnt' in the end.  Read More →

By Bhaskaran K from The Singapore Enquirer On Monday 6 July, the Select Committee tasked with choosing the candidates for the position of Nominated Members of Parliament (NMPs) released their final list of 9 nominees.   Though 46 candidates submitted proposals, 3 were rejected as ineligible. The following 9 were chosen from the remaining list of 43 eligible applicants.:   (1)        Mr Calvin Cheng Ern Lee           (2)        Mr Terry Lee Kok Hua   (3)        Mrs Mildred Tan-Sim Beng Mei   (4)        Assoc Prof Paulin Tay Straughan   (5)        Mr Teo Siong Seng   (6)        Mr Viswaroopan s/o Sadasivan              (7)        Mr Laurence Wee Yoke Thong   (8)        Ms Audrey Wong Wai Yen   (9)        Ms Joscelin Yeo Wei Ling   All 9 nominees are expected to be sworn in on 18 July upon approval by the President.   A cursory look at the list shows 2 names that should be familiar to the general public, Mr Viswaroopan s/o Sadasivan (better known as Viswa Sadasivan) and Ms Joscelin Yeo Wei Ling.   Mr Viswa is a well known political commentator who has worked as a presenter with the old Singapore Broadcasting Corporation, while Ms Yeo is one of Singapore’s most decorated athletes with 3 Sportswoman of the Year titles under her belt.   Mr Viswa is a recognised figure in civil politics, having actively taken part in government panels and discussions of censorships, social ills and political practices. His nomination is a natural step up from his previous commitments in civil society.   Joscelin Yeo’s sporting achievements should not require any introduction. With a tumult of medals and records in national and regional swimming competitions it is not without merit that the now retired swimmer was dubbed the Swim Queen in her heyday.   Apart from her swimming accolades, Ms Yeo’s communal contributions have yet to be highlighted. Her only known active participation is with a swimming school she runs with her brother and with the Youth Ministry of New Creation Church.   New Creation Church should be of some familiarity to the general public, having made the news for the wrong reasons several times over the past few years. The Church, run by Pastor Joseph Prince, made headlines as recently as March of this year when it raised $19 million in under 24 hours, for the construction of its new premise at Buona Vista, despite the ongoing recession.   News of the premise and its planned construction was first reported in the Straits Times in September 2007, when a $660 million deal was struck with CapitaLand to build an all-encompassing lifestyle hub called, The Integrated Civic, Cultural, Retail & Entertainment Hub @ Vista Xchange, one-north, or Integrated Hub @ one-north in short. A year later the Church increased its stake by investing a further $220 million in the project.   It is an astronomical sum of money that is virtually unheard of for any religious organisation to be in possession of. In October 2007 The Straits Times also reported that the church was one of 7 religious groups to have auditors check on them as part of a ‘governance review’ by the Commissioner of Charities (COC), for having an annual income of over $10million. New Creation Church had been the highest earner with $42.8 million.     In addition to that The Straits Times also reported in March this year, that one employee of the church was paid between $500 001 and $550 000 in the last financial year. Though it was not confirmed if the employee in question was Pastor Prince, the founder and leader of the church, it did however quote the church as saying it “recognize(s) and reward(s) key contributors to the church and Senior Pastor Prince is the main pillar of our church's growth and revenue'.   It should be of no surprise then that the activities of the Church have received public attention and drawn criticism. Several members of the Church have also left the congregation, feeling disillusioned by the business aspects of the organisation. The Church in fact even has a financial arm called Rock Productions, to oversee its business dealings. Apart from the one-north project, the church already owns and operates Marina Cove in East Coast Park.   It must be noted that neither Marina Cove nor the one-north project are restricted by religious denomination or themed as such. These are intended as family-centric, business enterprises, like any other shopping mall or recreational space. Much of the criticism instead falls on the ethics and practices of the Church.   I MUST state that it will be unfair to judge Ms Yeo’s capabilities as an NMP based on her affiliations. It is also unlikely that she was nominated based solely on her commitment to her church activities. Her sporting achievements and standing with the public would have played a far greater part in her selection.   However it does raise the legitimate question of whether a member of an organisation that has an ethos of extravagant practices of affluence, beyond that of any religious organisation, could reach out to the average Singaporean; even more so when taking into consideration that her only known service to the community has been within the realms of said organisation. The relevance of her nomination is thus debatable.   Another notable name in the list is Mr Calvin Cheng, a fashion entrepreneur who is a key player in the local fashion industry. Apart from his background in fashion, Mr Cheng was also a member of Young PAP and according to a report in TODAY on July 9, had only resigned from the party the day before.   Mr Cheng had stated,   "I am concerned that membership of the party during my term will have an impact on my ability to discharge my duties as an NMP, especially where public perception is concerned,"   Though this is true, and according to the same report, Mr Cheng was an inactive member of the party, the question that comes to mind is if someone who already has formal partisan affiliations should be designated an NMP post in the first place.   Critics would decry it as further consolidation of power by the PAP by nominating a candidate with affiliations to the party. What it certainly does however is go against the non-partisan nature of the role even if Mr Cheng had been a passive passenger in the party.   Ms Audrey Wong was one of 2 candidates put forward by members of the Arts fraternity. Apart from Ms Wong, two other members of the Arts community, theatre director Ms Beatrice Chia-Richmond and artistic director Ms Loretta Chen, were also said to be initially in the running. A voting session held by the Arts community in early May, picked Ms Chen and Ms Wong as their representative.   It was just 2 months ago that a small furor erupted online when the names of Ms Chen and Ms Chia-Richmond were bandied about as possible NMP candidates. The criticism reigned upon the allegation that both women would, and were planning to, use the parliamentary platform to further their supposed homosexual agenda having already produced plays that carried such views. Ms Chen was the recipient of much of the flak for being an allegedly open homosexual.   The eventual nomination of Ms Wong ahead of Ms Chen however should be in part to her stellar credentials, which includes having worked as a journalist for The Straits Times prior to her engagements in the Arts scene. It must be noted that, Loretta Chen was once a member of the youth wing of the PAP unlike Ms Wong who thus far has had no known prior political affiliations.   It is highly unlikely that in the larger scope of public issues to be considered, the issue of homosexuality would have weighed heavily as a priority let alone as pressing. But the issue is no less insignificant enough to be brushed aside.     Hence, the nomination of Assoc. Prof. Paulin Tay Straughan does appear to be strategic, lest progressive. Prof Tay specialises in Medical Sociology, Gerontology, Work and Family and Organizational Behaviour but has weighed in her views on homosexuality to the media in the past. Prof Tay’s stand on the issue appears to be neutral and generally mediatory, more in conjuction with the idea of tolerance and balance as preached by the ruling government.   Most of the attention has been on the absence of Mr Siew Kum Hong, a lawyer who featured prominently in the AWARE leadership saga in May. He was one of two candidates who had applied unsuccessfully for a second term, the other being Mr Gautam Banarjee, executive chairman of PricewaterhouseCoopers.   Mr Siew is another candidate mired in the homosexual debate. He had previously been criticised, for his role in the AWARE incidents, with some corners of the online community branding him a ‘homosexual acitivist’, while others questioned if it was appropriate for an NMP to have been a participant in such affairs.   The response from Mr Siew on his exclusion has been somewhat muted. In an entry on his blog, he reluctantly accepts the decision with some disappointment and refuses to speculate on the AWARE incident as a contributing factor.   But he does however provide a staunch defence of his participation in the AWARE leadership tussle. He stresses his role in AWARE as being long standing, and not in contradiction with his parliamentary duties.   It is highly unlikely that his participation in AWARE was a contributing factor, as it is that very role that would have aided his credentials as a NMP in the first place. The only negativity surrounding him is the inadvertently public role that he had played in the incidents.   Mr Siew is right to argue that being a NMP should not diminish his right to participate in civil activities. Especially if it is for a cause that he had been part of prior to his parliamentary engagements. However as a Member of Parliament he does not just represent his own interests but that of all Singaporeans. Mr Siew had overwritten his responsibility as a Member of Parliament with the pursuit of his own civil interest.   One has to come before the other, and by aligning himself with one group he had marginalised his own representation. This is a fatal flaw that all politicians seek to actively avoid, for fear of losing their standing with the masses. A case in point would be the lack of involvement by any of the other political figures during the incident, despite the escalation of the matter. Hence the backlash he received from the public should be of no surprise.   It may seem plausible that he was omitted for the negative attention that he had drawn but it should also be noted that the entire list of NMP candidates consists of new faces, many of whom are likely to have a more significant role in parliament for the expected changes in the social and economical climate in the coming years.   For example, NMP candidate Mr Laurence Wee is executive director of the Presbyterian Community Services Singapore and the previous president of the Gerontological Society of Singapore. He has already stated that his interests lie in the well being of the older population, an issue that has always been of prime importance given Singapore’s expected disproportionate population of the elderly.   Mr Terry Lee Kok Hua, is a veteran unionist and an NTUC Central Committee member since 1997. He is also the President of Singapore Insurance Employee’s Union. He is certainly a direct replacement for the outgoing NMP for the Labour Movement, NTUC Industrial Relations Director Ms Cham Hui Fong.   The presence of a Labour NMP would be essential in the current economic climate, with NTUC Secretary—General Lim Swee Say recently stressing that the economic downturn has not passed despite the fall in retrenchments in Q2.   Mr Teo Siong Seng is also expected to play a part in the economic debate as he has stated his interest in speaking up for SMEs. Mr Teo has a shipping background and is the President of the Singapore Shipping Association and chairman of the Singapore Maritime Foundation.   Ms Mildred Tan is a member of the National Council on Problem Gambling, the National Family Council, the Pro-family Business Council, and Community and Parents in Support of Schools (Compass). It is her membership in the National Council of Problem Gambling that would be noteworthy. With the expected opening of the first Integrated Resort in early 2010, the matter of gambling would almost certainly be at the forefront of social issues for the coming years.   Critics might argue that their presence in parliament will be no more than a means to pacify real pressing issues with superficial lip service and no practical solutions. However, the practicality of their role has not been constitutionally limited as many might think. The possibility of pushing forward legislative initiatives, if necessary, is within their means. How this new batch of NMPs might contribute constructively will only be seen in the years to come.      Read More →